Three Rivers District Council v. Governor and Company of The Bank of England

Factual and Procedural Background

The Plaintiff, representing a large group of depositors, sued the Defendant (the statutory banking regulator) for alleged misfeasance in public office arising out of the Defendant’s decision in 1980 to grant, and thereafter maintain, a banking licence for Company B (a foreign-incorporated bank that later collapsed in July 1991). The Plaintiffs claimed that the Defendant knowingly—or with reckless indifference—failed to exercise its supervisory powers, thereby exposing depositors to loss.

At first instance a Commercial Judge struck out the claim, holding that it disclosed no realistic prospect of success and that continuation would be an abuse of process. A divided Court of Appeal affirmed. The Plaintiff appealed, and the Defendant cross-appealed on certain preliminary issues. The present opinion is the final judgment of the ultimate appellate court, delivered after an earlier hearing had already settled the correct legal ingredients of the tort of misfeasance in public office.

Legal Issues Presented

1. Whether the Plaintiff’s pleadings disclosed a viable cause of action in misfeasance in public office.
2. Whether the action should be summarily struck out, or judgment entered for the Defendant, on the basis that the claim had no real prospect of success under modern summary-judgment principles.
3. Whether reliance by the lower courts on an earlier private inquiry report (the “Bingham Report”) was legally permissible at the strike-out stage.
4. Whether the Defendant’s cross-appeal on causation and standing should succeed.

Arguments of the Parties

Plaintiff's Arguments

• The new draft particulars adequately plead each element of misfeasance, including knowledge or reckless indifference to probable depositor loss.
• The lower courts wrongly treated the Bingham Report as conclusive, despite its inadmissibility at trial and the Plaintiffs’ lack of participation in that inquiry.
• Discovery and cross-examination could realistically yield further evidence of the Defendant’s state of mind; therefore summary judgment was inappropriate.
• The claim should proceed to trial with leave to amend and with case-management directions from the Commercial Court.

Defendant's Arguments

• The particulars remained defective: they asserted dishonesty but relied on facts equally consistent with mere negligence.
• Even on the assumed facts, the statutory scheme left supervisory powers discretionary; failure to act could not be “unlawful” for misfeasance purposes.
• All relevant materials—including the Bingham Report—showed that officials acted bona fide and sought a rescue package; the Plaintiffs therefore had “no real prospect” of proving bad faith.
• The entire claim, or at least substantial portions predating 1990, should be struck out to conserve judicial resources.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court emphasised that it was effectively reviewing an application for summary judgment under the Civil Procedure Rules. Two questions were pivotal:

• Pleading adequacy. The new draft particulars, although “at the margin,” alleged bad faith, identified specific periods (licensing in 1980 and supervision thereafter) and set out factual schedules sufficient to allow the Defendant to plead a defence. Any arguable deficiencies could be addressed at trial through case-management, not by striking out.
• Prospects of success. The lower courts impermissibly treated the Bingham Report’s findings (and absence of findings) as effectively conclusive. Because the inquiry was private, non-statutory, lacked adversarial testing, and excluded the Plaintiffs, its conclusions were inadmissible at a future trial and should not determine a summary-judgment application. Once the Report’s evaluative passages were disregarded, the evidential picture was not so one-sided that the claim was “bound to fail.” Discovery, witness evidence and cross-examination might yet reveal material touching the Defendant’s knowledge or recklessness—especially for the 1990-1991 period when collapse risk was acute.

The Court further held that discretionary case-management considerations (cost, length of trial) could not override the Plaintiffs’ right to a fair adjudication where an arguable claim subsisted.

Holding and Implications

APPEAL ALLOWED; CROSS-APPEAL DISMISSED. The strike-out order is set aside. Plaintiffs receive leave to amend in the form of the new draft particulars. Directions for an expedited and tightly managed trial are remitted to the Commercial Court; costs were reserved for written submissions.

Implications: the judgment clarifies that, in complex regulator-liability cases, courts must apply the CPR Part 24 test rigorously but without relying on non-admissible inquiry findings. Allegations of misfeasance in public office may proceed to trial where pleadings are legally sufficient and disclosure might realistically add probative material, even though ultimate success remains uncertain. The decision does not create new substantive duties but reinforces procedural safeguards against premature dismissal.